Patent Cases Reach New Record High of 6,500 as Patents Granted Continue to Grow According to PwC’s Patent Litigation Study

New this year is an analysis of patent litigation appellate outcomes from

the Federal Circuit

NEW YORK, July 10, 2014– According to the 2014 Patent Litigation Study released today by PwC US, both the number of U.S. patent cases filed and the number of patents granted continued to grow rapidly in 2013, up 25 percent to a new record high of 6,500 cases and up 7 percent to almost 300,000 patents, respectively, compared to 2012. However, the median damages awards continue to trend down, declining to $4.3 million in the most recent four-year period.

Nonpracticing entities (NPEs) continued to play a growing role in patent litigation in 2013. PwC reports that although more than half of new cases are reportedly filed by NPEs, only 20 percent of identified decisions in 2013 involved NPE patent holders, which indicates the higher tendency for NPE-filed cases to settle or be dismissed. Despite this, NPEs’ median damages awards averaged more than triple those for practicing entities over the last four years. Conversely, PwC found that NPEs generally prevail less often than practicing entities, with NPEs successful 25 percent of the time overall, versus 35 percent for practicing entities, as a result of the relative lack of success for NPEs at summary judgment. However, both types of entities win about two-thirds of their trials.

“At first glance, 2013 appeared to be a moderating year in patent infringement litigation since there were no mega-verdicts and damages awards moderated from previous years. However, the number of patent cases filed and granted is continuing to grow rapidly,” said Chris Barry, PwC Advisory partner focused on Forensic Services. “Additionally, NPEs’ prevalence in patent litigation, coupled with certain reported aggressive tactics, have captured the attention of practicing entities as well as incited multiple political responses. With patent cases increasing and actions aimed at constraining perceived litigation abuses, recognizing the ongoing issues in patent litigation and intellectual property matters is critical.”

PwC’s 2014 Patent Litigation Study also found that:

The median jury award amounted to nearly 37.5 times the median bench award between 2010 and 2013.

Reasonable royalties remain the predominant measure of patent damages, consistently representing around 80 percent of awards since 2000. However, lost profits showed a surprising resurgence over the last four years, growing to a 37 percent share of the awards.

The median damages award in the telecommunications industry was the highest at $22 million.

The biotechnology /pharmaceutical, medical devices, and computer hardware /electronics industries also had relatively high median damages awards, at double to triple the overall median of all industries.

The top four districts in terms of favorability to patent holders (Virginia Eastern, Delaware, Texas Eastern and Wisconsin Western) remain the same as last year’s study, with shorter time-to-trial, higher success rates and greater median damages awards.

Six patent cases were granted certiorari in the current term, relating to matters such as: the scope of patentable subject matter in business method patents; the extent to which activities outside U.S. borders can infringe U.S. patents; under what circumstances defendants can recover litigation costs from losing plaintiffs; and certain technical patenting and procedural issues.

New to the PwC study this year is an analysis of patent litigation appellate outcomes from the Federal Circuit. PwC found that about 71 percent of district court patent deci­sions are appealed to the Federal Circuit, usually on multiple grounds. Of these, 64 percent received a reasoned opinion, 11 percent concluded with a summary affirmation and the remaining 25 percent were dismissed, settled or are still pending (4 percent). Of the appeals decided by the Federal Circuit, 65% received a mixed decision on the multiple issues typically raised, 11% were reversed / vacated / remanded in total, leaving only 24% affirmed in total. Accordingly, 76% of patent cases appealed to the Federal Circuit were modified in some manner.

PwC maintains a database of U.S. patent infringement actions. The firm collects information on liability outcomes, damages awarded, time-to-trial, trier of fact, type of entity (practicing vs. nonpracticing), industry, district court and judge. The firm’s primary case data relates to the 19-year period of 1995 through 2013.

PwC's Forensic Services team of experienced professionals is dedicated to meeting the challenges caused by fraud allegations, financial crimes and other irregularities. Our portfolio of services includes: Financial Crime Examinations, Forensic Technology Solutions, Regulatory Compliance Reviews, Fraud Risk Management and Prevention and Dispute Analysis. The Forensic Services team also manages the PwC Fraud Forum, an exclusive community where members can gain knowledge, participate in events and share important insights on preventing, detecting and investigating fraud, corruption and economic crime. See www.pwc.com/us/forensics and usfraudforum.pwc.com for more information.

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